UPS-TNT's changing value

UPS may have to wait until next year and agree to some divestitures before the European Commission approves its acquisition of TNT Express. The question is: what dollar value will the deal have when it finally closes?

The ongoing euro zone drama is not irrelevant to the merger of the delivery companies based on opposite sides of the Atlantic Ocean. Though there has been a slight uptick recently, the euro's value is on shaky ground as European leaders scramble for solutions to maintain their monetary union.

Atlanta-based UPS has agreed to a euro value purchase price for Amsterdam-based TNT: 5.16 billion. When the deal was first announced in March, that meant buying TNT would cost UPS $6.8 billion. Now it means the purchase will cost UPS $6.4 billion or $400 million/7.3% lower just five months later. Last month, the value was down to $6.3 billion.

Analysts appear to expect the euro to hold relatively steady against the dollar in coming months. But who knows? A misplay by European leaders could easily sink the euro's value and with it the dollar value of UPS's largest-ever investment.

Not that this is something UPS is intensely focused on. It is a wealthy company easily able to finance the transaction, and it will take over a company that charges its European customers in euros (so it will pay on the other end if the euro drops significantly). Also, it would much rather have had the deal approved earlier when the euro was doing a bit better than sweat out the EC antitrust examination.

But it's worth noting that depending on what happens over the course of the rest of this year and perhaps early next year the closing purchase value could be somewhat lower than when the UPS-TNT deal was reached.